But the YouTube folks went out of their way to downplay the launch, describing it is as the first stage of an experiment.

We should take them at their word.

Yes, the notion of the world’s biggest video site selling content could be a big deal. One day. But right now there’s not much there there.

Take a look at the initial list of channels YouTube rolled out yesterday, which the site says will eventually balloon to 53 offerings from 30 partners. You’ll notice a couple of things:

• With the exception of “Sesame Street” (announced but not available yet), National Geographic and the UFC, there aren’t any mainstream brands or shows.
• Just as important: With the exception of The Young Turks (also announced but not available), there aren’t any YouTube-native stars — people/brands/channels who have built big fan bases on the site, and who could presumably convince some of them to pay for extra access.

It’s not surprising to see the Big Media companies steering clear of YouTube. Those guys are wary of Google in general, and when it comes to video, they have a very big, very lucrative business set up already. And their efforts to rent movies on the platform haven’t gone anywhere.

YouTube will have to make a compelling case for them to start selling subscriptions, which is sort of the point of the experiment, anyway.

It is eyebrow-raising to see the lack of YouTube talent there. YouTube has been talking up subscriptions to some of them as they complain about disappointing ad sales, and it seems as though at least a few would want to try it out — not to put all of their stuff behind a paywall, but at least to offer some extras to die-hard fans.

I assume some of that will change over time. YouTube is stressing that it expects to see more partners once it sets up a self-service subscription tool in the next few weeks. And at least a few big players, like Machinima, have been talking about subscription plans.

But it’s not like subscriptions are a surprise. YouTube has been talking about the concept in broad terms for at least a year, and in earnest since last fall. Anyone who wanted to test the concept has had plenty of time to get ready.

So why aren’t they there now?

The optimistic explanation is that they’re waiting to see how it works for yesterday’s guinea pigs, and if it pans out, they’ll show up.

The more cynical version: They’ve decided that if they are going to sell stuff, they’re not going to do it on YouTube — they’ll use the site to promote themselves to a billion people a month, but they’ll make sure they keep additional revenue streams out of Google’s hands.

Both sound pretty plausible to me.

According to numerous sources close to the situation, Yahoo CEO Marissa Mayer recently met with top execs at Hulu, the premium video service whose big media company owners have been considering selling it for some months.

Sources said Yahoo is “in the process,” although the Silicon Valley Internet giant has not made any kind of formal bid. Other players whom sources said are considering purchasing all or parts of Hulu include: Former News Corp. COO Peter Chernin, who now has a successful and well-funded multimedia and investment company called the Chernin Group; Guggenheim Partners digital arm, which is led by former Yahoo interim CEO Ross Levinsohn; and Amazon.

Sources said Mayer also had an extensive getting-to-know-you meeting, which was apparently not held at Hulu’s offices in Santa Monica, Calif., along with COO Henrique De Castro. The discussion is taking place in the wake of Yahoo’s failed bid — largely engineered by De Castro — to purchase a majority stake in France Télécom’s Dailymotion video service, after a top French government official said Yahoo could not own 75 percent of the company.

Had the deal — which was reportedly valued at $300 million — gone through, it would have been the most significant by Mayer since she took over at the company last July. Thus far, she has limited her purchases to small mobile startup.

While the meetings with Hulu are only preliminary, Yahoo has been to this video rodeo before, having seriously considering buying Hulu when it was previously being shopped by its owners, News Corp., Disney and Comcast. (News Corp. also owns this site.)

Of course, if Yahoo’s interest becomes more serious, Mayer will have to make important visits to top execs at those media giants, since they control the rights to critical content, and thus Hulu’s value.

As Peter Kafka noted in a previous post about Hulu’s possible sale, “much hinges on the licensing rights News Corp., Disney and Comcast would provide for the money-losing site, as well as what happens to the $300 million debt its owners have taken on in the last year.”

Without those rights, Hulu by itself is a very pretty Web site and video platform, but not worth the billions it would be with very long-term television rights, content that attracts users. Currently, sources said its media owners are offering two to three years of rights, with a lot of flexibility over removing content from the site, which is not quite as attractive a deal (to say the least).

But video is a key component of Yahoo’s strategy going forward. Along with mobile efforts, Mayer has explicitly told investors that video was a key to company under her tenure.

Coincidentally, today in an onstage interview at a Wired conference in New York, Mayer broadly addressed the video issue when asked a question about the topic, noting it was important across all of Yahoo’s properties.

“I think video is really important … video is something that we’re all innately designed and born to experience, everyone is born being able to watch and to hear,” she said. “Video is just this amazing format.”

Mayer would know that well, having been at Google when the search giant bought YouTube, ironically snatching it at the last minute from a competing bid by Yahoo, which was then led by Terry Semel. Since then, YouTube has become the most important and powerful player in the space by far.

Yahoo, despite being one of the largest video players on the Web, has mostly been a lackluster competitor in the arena, pinging over the years from creating original content to doing branded deals with media companies, but never establishing a major beachhead with consumers as Hulu did from scratch.

Short of a full acquisition, there may be a way for Yahoo to partner and invest in Hulu, instead of buying it outright that works for all sides — owners get a new owner to foot part of the bill and also increase distribution, and Yahoo can claim that it’s providing users with exponentially more content that would help Yahoo’s long-declining engagement problem.

Sources said News Corp. and Disney have mulled scenarios where one or both companies hang on to the site, while Comcast has no control over Hulu’s fate, having given up its management rights to the site as a concession to federal regulators.

But the strength of the Hulu brand is clear and it has had some success in building a more significant business. While a lot of its video offerings are free, about four million people are paying for a Hulu Plus subscription.

Still, Hulu’s strength might be lagging, especially given after talented founding leader Jason Kilar recently left. Last year, Hulu was a top 10 video site, according to comScore. No longer — in a report in March, it had dropped out of the top 10.

While this likely has more to do with methodology than real decline in Hulu ratings, it does show that while it’s the biggest thing Yahoo could buy or invest in, Yahoo itself has plenty of video views, many more than Hulu.

The question for Mayer then is how much of Yahoo’s multi-billon-dollar cash kitty she wants to bet on a big video play. She might also be considering buying several smaller ones, said sources, with Yahoo having also looked at some smaller video sites, including Blip and Grab Media.

A spokeswoman for Hulu declined to comment and Yahoo PR has not responded to a query for comment (if ever).

So how about Hulu Plus, the subscription service that runs ads in the middle of its TV reruns? Turns out it is doing just fine: Hulu says its paid service now has four million subscribers paying $8 a month.

That’s not nearly as much Netflix, which boast some 30 million subscribers for its ad-free service (also $8 a month). But that seems awfully respectable to me, considering that Hulu Plus has been around (in one form or another) for less than three years.

Maybe even impressive, since much of what Hulu Plus offers are TV shows you can see for free on broadcast TV, or even on “regular” Hulu.com. The main selling point for Hulu Plus, I think, is that you can watch the service on a variety of screens, including phones, tablets and your actual TV, via devices like Apple TV.

The announcement comes as Hulu puts on a show for advertisers in New York, part of the week-long “newfront” presentations the big video websites are hosting. (Yesterday: Yahoo! Tomorrow: YouTube!)

While Hulu is still best known as the place to watch last night’s TV (or in some cases, last week’s TV), it is interested in promoting the stuff it has that you can’t see on TV.

Like Netflix and Amazon, it is investing in its own original programming; unlike Netflix and Amazon, its efforts have gotten much less attention, a fact that steams Hulu’s management team. So if you want to help them out, go ahead and look at the preview reel for “The Awesomes,” an “animated show for adults,” co-created by Seth Meyers of “Saturday Night Live”; it seems to be the new show Hulu is most excited about.

The good news for Andy Forsell, Hulu’s acting CEO, is that advertisers are already receptive to Hulu’s pitches, both for the reruns it airs and the new stuff it is showing. It looks like TV and Hulu is selling it like TV, and many ad guys like that a lot, especially compared to Google’s more … Googley approach with YouTube.

The bad news for Forsell is that he’s acting CEO, because Hulu’s corporate future is completely unsettled. It’s entirely possible, and probably likely, that the site, currently owned by News Corp.,* Disney and Comcast, will have a different ownership structure by the end of the year, and may have a different agenda, as well.

I’m guessing that doesn’t come up during this morning’s presentation. What I don’t know is whether that matters to advertisers or viewers.

*News Corp. also owns this website.

While the Théâtrophone was an impressive invention in its day, the subscription model itself has a prolific and fascinating history of enabling innovation throughout the world. Subscriptions have helped companies pioneer new distribution models across a diverse set of business applications; all in the name of seeking efficient annuity revenue streams that outweigh the cost of production and distribution. From an end-customer “subscriber” perspective, the convenience of easy access or repeat consumption can greatly outweigh the incremental cost of subscribing.

Subscriptions have historically also found ways to take on greater social meaning through the signaling of a certain status by way of access to a secret society, social club or charitable organization. In the 1700s, by “subscribing” to become a benefactor to a charitable organization or society, individuals were able to achieve certain significance among their peers. Subscriptions to charity balls and full-seasons of theatre access were as much of a status symbol as they were convenient. Country clubs, yacht clubs, athletic clubs, fraternities and other private clubs have almost always been entirely member funded by way of the subscription membership model. Memberships, dues, donations and even tithing from the Catholic Church were achieved via scheduled “subscription” payments.

During the 18th century, the notion of subscription that we know today arrived when subscriptions to periodicals, magazines, books and theatre events became common. These subscriptions typically included delivery of the printed material and were sold for a specified number of issues or a period of time.

During the 1800s, the idea of pay-as-you-go subscriptions emerged to support the need for staple items such as heating oil, coal, milk, ice and even diapers to be delivered to your home. In Paris, a five-franc annual tariff was levied on all residents for their “subscription” to a hectoliter of drinking water per day.

Throughout history, we observe some interesting commonality across each of these examples. Whether we’re talking about subscriptions for the purpose of convenience, pay-as-you-go consumption, engagement or status, the underlying business driver has always been that subscriptions provide the ability to generate capital in the form of an attractive annuity revenue stream. From a financial perspective, companies that are able to generate a growing audience of subscribers producing predictable revenue streams are far more capital-efficient than companies that need to acquire, and then re-acquire, each customer interaction. (If you’re ever curious about this assertion, just ask yourself why so many insurance companies occupy the largest buildings across all major cities in the United States.² By definition, insurance is an annuity-based, subscription business.)

Fast forward to today. We are in the midst of yet another explosive expansion of subscription business models. From traditional media moving to digital media, to the rapid adoption of SaaS and cloud-based businesses, mobile and social products, applications and services are all careening toward some form of subscription-based offering. This is largely because the cost of developing and launching new businesses has declined to such an extent that it requires a very different level of up-front capital investment to chase these opportunities.

Why are subscription models everywhere today? The following intersection of trends is powering the recent appeal for subscriptions:

From the business perspective, there has always been a strong appeal in creating a predictable stream of revenue. Beyond that, the notion of maximizing lifetime value from existing customers is something that has always existed, but is now enabled through better visibility into activity. Traditional e-commerce companies like eBay have long focused on optimizing the “Triple A’s” — Acquisition, Activation and Activity. With today’s technology in place, we now have the ability to solve for all of these variables in a way that is not only more palatable to the end customer, but in many respects the optimization is couched in a way that is actually a benefit to the customer. (Think about the recent reminders you’ve likely received from your oil changer, dentist or even hair stylist that it is time for you to come back for your next appointment.)

Consumers have evolved a long way from the cable and magazine subscriber of yesterday as well. Today, consumers expect to have a range of choice in their offerings. They’ll commit to subscribe particularly if they have the ability to select from a range of feature/pricing options that best suit their own preferences.

There exists a psychological minimum. If a service is offered at a price level that feels low enough in relation to the marginal benefit that they receive, a consumer will subscribe. Conversely, they will elect to cancel if the marginal benefit wanes and is no longer worth the cost to continue subscribing. Managing the perceived value of any subscription product or service over time creates a relationship between the consumer and the service provider, each of whom seeks to maximize the value they are receiving from the other.

At the same time, the upfront capital investment required to launch a new enterprise service has declined to such an extent that it affords businesses a greater opportunity to test and learn as they go. As recently as 10 or 12 years ago, during the first dot-com boom, companies raised massive amounts of money not only to signal a coveted first-mover market position, but also to fund the huge amount of investment required to scale out a company. Today, we have cloud services and SaaS/PaaS offerings like Amazon Web Services and RackSpace.

The Web has become too fragmented to sustain ad-only revenue models.
Ten years ago, venture capitalists were inundated with companies seeking funding for ad-supported business models. Today, the Web is far too fragmented to support businesses seeking to aggregate massive ad dollars.

There has been a 100X reduction in the cost of software infrastructure within 10 years.
Here is an example: In just over 10 years, the “rented” application infrastructure model once offered by Kontiki (before it was called SaaS/PaaS) would have cost a customer approximately $100,000 per month to launch a business. Today, the same offering is delivered by Amazon Web Services for approximately $1,000 per month.

The cost of storage has plummeted 16X in the last 10 years.
Today, it costs you $0.085 per GB to store data. Ten years ago, it cost $1.39/GB. This decline in storage costs has created the opportunity for subscription-based file-sharing and backup companies like Box.net and Dropbox.³

The cost of Internet bandwidth “transit” has declined 75X in the past 10 years.
Entirely new business models have emerged due to the proliferation of inexpensive and ubiquitous broadband connectivity. This has allowed companies like Hulu and Netflix to have distribution to large markets at economically sustainable rates.⁴

Open-source software has eliminated the need for expensive licenses.
Ten years ago, companies aiming to deliver a service at scale were likely to sign up for expensive Oracle and Microsoft licenses. Today, startups have an impressive roster of free open-source software to choose from to run their operations.

On the Web today, the confluence of these trends is creating new markets and opportunities. The functional role of marketing has evolved to become increasingly data-driven.

Financial CRM allows the consumer to get what they want, and the business to provide a well-crafted migration path of high-probability options for cross-sell and up-sell options in the future. The management of this path for monetizing users post-sale has become an even more critical discipline for maximizing enterprise profitability than the sexy and creative brand-building efforts on which companies have traditionally focused.

All of these factors combined increasingly lead entrepreneurs to a similar conclusion. It is now far more efficient to offer products and services via subscriptions. Subscription pricing easily attracts customers, eliminates their purchase anxiety and, if designed well, keeps them happily paying over a longer period of time. Subscription models not only allow for attractive and efficient pricing, but also alleviate the need for a heavy-handed sales pitch. Ultimately, customers appreciate that they are in more control — always having the ability to upgrade their service, or to cancel and move on to something better.

Based in San Francisco, Dan Burkhart is the CEO and co-founder of subscription billing service Recurly, Inc. He was also an executive at eBay and NBC Internet.

And here’s something else to calm your nerves: Our Top 10 stories from the week of Mar. 4:

1.) White House: It’s Time to Legalize Cellphone Unlocking

2.) Yahoo CEO Marissa Mayer Gets a Million-Dollar Bonus After Six Months on the Job

3.) YouTube’s Show-Me-the-Money Problem

4.) IBM Makes a Big Bet on OpenStack in the Cloud

5.) What Could Apple Buy With Its $137 Billion? About 18 Homes Each for Every Yahoo to Not Work At, and More!

6.) Former Top Yahoo Ad Exec Sues Yahoo, Accusing It of Trying to “Cheat” Him Over Acquisition Compensation

7.) Heads Turn as Microsoft Shows Off 3-D Scanning Techniques

8.) Loose Lips: Yahoo M&A Head Told Employees Company Looking at Two “Significant” and a Half-Dozen Small Buys

9.) The Disappearing Interface

10.) Why Google Thinks Two Music Subscription Services Are Better Than None

For more of the week in review, you should follow us on Facebook and Twitter.

Hearst Ventures, the investment arm of media giant Hearst Corporation, said it was making a minority equity investment in Science, the Los Angeles area tech “studio.”

Privately held Hearst is the sole investor in the new funding, although the company declined to reveal financial terms of the investment.

But sources with awareness of the deal said it was close to $30 million for a stake above 20 percent.

Somewhat akin to a startup accelerator, Science is attempting to quickly create and scale a number of promising companies in a variety of areas, and has launched 13 so far.

Among the Santa Monica, Calif., tech studio’s recent efforts: Dollar Shave Club, a subscription-based products company aimed at men; Ellie, which sells high-end activewear for women; and Wittlebee, a clothes club for kids.

Hearst Ventures is operated by Hearst’s Entertainment and Syndication unit, which is run by Scott Sassa and George Kliavkoff. Kliavkoff will join Science’s board of directors.

“It’s clear to us that, while we have these brands that resonate with consumers, we think there are some learnings we can get from these guys that are hard to get in a big company,” said Sassa. “Being able to be nimble with insight and guidance is important for us.”

Kliavkoff also noted that this was a way to get immediate ownership in a range of promising companies. “We are writing one check and will have an immediate stake in more than a dozen great startups,” he said. “[Science] has been very thoughtful in starting companies in smart areas.”

In a statement, Hearst CEO Frank Bennack said: “Hearst is continually looking for smart investments that bring value and intelligence to the company — our investment in Science does both. We’re excited to partner with Science to continue its trajectory of success, gain meaningful industry knowledge and utilize Science’s platforms for current and future Hearst investments.”

Though quieter than most, Hearst Ventures have made many successful investments over 15 years, including in Netscape and Broadcast.com. More recently, it has funded such companies as Brightcove and Pandora, as well as HootSuite and BuzzFeed.

Science was founded in late 2011 — with $10 million funding from big-name investors including Google Chairman Eric Schmidt’s Tomorrow Ventures, Rustic Canyon Partners and White Star Capital. Its CEO is well-regarded entrepreneur Mike Jones, who was most recently CEO of Myspace. Prior to Myspace, he had started and sold Userplane to AOL in 2006. In addition, well-known entrepreneur Peter Pham is chief business officer at Science.

“I am very proud of work that the Science team has accomplished since launching,” said Jones, in a quick interview tonight (short enough so that his wife would not get angry at me for ruining Valentine’s Day). “I am extremely excited about opportunities for Science companies going forward.”

More to come, but here is the very clever viral video that Dollar Shave Club did on its launch:

I don’t have more details about the coming cuts. But the Time Inc. employees I’ve spoken to seem to put great stock in Keith Kelly’s report from earlier this month, which predicted that up to 700 of the publisher’s 8,000 employees may go in this round.

If so, that will eclipse the company’s last big round of layoffs, in 2008, when former CEO Ann Moore cut about 600 jobs. Those layoffs, and subsequent cost-cuts, have allowed Time Inc. to stay profitable as the magazine industry contracts.

But the top line keeps dropping: In the third quarter of last year, Time Inc generated $840 million in revenue, down from $1.1 billion in 2008. Meanwhile, parent company Time Warner has continued to evolve into a cable TV conglomerate.

New CEO Laura Lang has been on the job for a year, and has pushed her company to look for new revenue streams, including digital deals; last year, she brokered an agreement to sell iPad subscriptions via Apple’s iTunes store.

No comment from Time Inc. or parent company Time Warner.

This morning, the New York-based company handed out pink slips to about 25 employees, or about 35 percent of its staff, according to a source familiar with the matter.

Lot18 will now employ 46, half as many as it did a year ago.

It is the second layoff in the past year for the startup, which started selling wine online in November 2010.

The first round was tied to the discontinuation of its travel and food businesses, which it had expanded into shortly before raising $30 million in venture capital in late 2011. Investors include Accel Partners, New Enterprise Associates and FirstMark Capital.

This time, the layoffs are connected to a shift in strategy. Rather than exclusively operate as a flash sales company, which sells bottles of wine at a discount to a free membership base, it will also try to sell wine through a subscription model.

The model is already well established by others in the industry, such as Global Wine Company, which runs the New York Times Wine Club, for instance, and Direct Wines, which operates a wine club for The Wall Street Journal.

The recurring revenue stream is far more predictable than getting members to return to the site and pay for single orders. As it stands right now, Lot18 is a marketplace, so it does not own any inventory or warehouses. Instead, the company’s headcount is a considerable expense, as are its marketing costs to get new members — just like other sites, including Groupon. In addition, it subsidizes shipping, since wine is so heavy and fragile.

According to a spokesperson, the new initiative is allowing the company to scale back on the time and attention that the flash sales business requires. However, not all employees will be let go immediately and Lot18 plans to do select hiring for the new business.

In a statement, CEO Jay Sung said: “The team we have — and many of the excellent people who left the company today — worked incredibly hard to make Lot18 strong, but we need to resource according to our new business model and operate the existing business more efficiently with considerably less burn.”

The cuts impacted all parts of the company’s business, including marketing, procurement and merchandising. Andrew Koch, the company’s VP of product, left the company recently, and we are hearing that Barbara Anderson, the company’s chief counsel, is leaving voluntarily. Lot18’s founder, Philip James, remains with the company and is leading the launch of the new subscription business.

In the fourth quarter, the company tested two new subscription services. Customers could either sign up to receive six bottles for $99 a month, or 12 bottles for $149 a month (the first month cost $49 and $79, respectively).

Since its launch, the current club has exceeded its growth targets, the spokesperson said. A new product launch will occur in early 2013.

HBO, which normally plays up the value of its original productions like “Game of Thrones,” says that 84 percent of its conventional TV viewing* comes from movies.

The deal, which many observers had expected, was done well in advance of a 2016 expiration date. It’s relevant primarily because it means that the movies won’t end up on digital subscription services like Netflix or Amazon.

There had been industry chatter about Universal owner Comcast taking the movies in-house to create its own Netflix-like service, or to fold it into its existing Streampix offering, but that won’t happen, either.

The next big question for movie-distribution observers is the status of Sony’s deal with Starz. BTIG analyst Rich Greenfield, among others, thinks Netflix will end up with that one, too.

We’ll have HBO President and COO Eric Kessler onstage at D: Dive into Media next month.

*That is, the stuff that people watch when HBO airs it, as opposed to on-demand plays and views via its HBO Go service.

And as far as everything else: Nada.

In the past, Jason Kilar has used these state of the company reports to make big declarations about The Future Of TV, or at least the near-term future of Hulu, the joint venture between News Corp., Disney and Comcast (News Corp. also owns this Web site).

Today, there’s none of that. Just the numbers, sir.

And maybe, if you’re into tea-leaf-reading, an oblique reference from Kilar: “So much has changed” since the company’s conception in 2007, he notes.

Which might be, among other things, a reference to big changes behind the scenes with Hulu’s corporate owners, who haven’t had a consistent approach to the site in five years. And/or its employees, who have had a “liquidity event” worth roughly $200 million this fall.

Or maybe it was just some he words he typed up and put on a blog. (I know the feeling!)

Back to the numbers: Hulu will do $695 million in revenue this year. That’s up 65 percent from the $420 million it did last year, when revenue was up 60 percent. And that three-million-plus number for Hulu Plus is two times last year’s tally (Hulu competitor Netflix has around 27 million paid subscribers worldwide).

In the past, Hulu has said that it expects subscription dollars to make up more than half of its total revenue. It doesn’t spell that out here, but I believe it’s still the case.

So that’s all good and bow-worthy for the Hulu team. The questions about how it works with its content/partner owners, and who at Hulu will be around to work with them, we can tackle some other time.

What Ek didn’t talk about: Any fundamental changes to the way the service operates — anyone can use it for free, and subscribers who pay $10 a month get extra features. And he didn’t mention any plans to change its marketing strategy, which to date has been largely dependent on word of mouth and a big boost from Facebook.

That’s because things are working well the way they are now, Ek said in an interview after the event. Equally important is his assertion that Spotify’s business model is sound, and that the company can succeed without big changes in the way the music business licenses its product.

If that claim pans out, it means Ek will have won where just about everyone else has failed. Here’s an edited transcript of our conversation:

Peter Kafka: Your event today was mostly about product changes. But you have to be a current Spotify user to appreciate the changes. How will the changes help you bring in new people?

Daniel Ek: I think the social part is really core to this. Social isn’t just about engaged people who are already on the platform. It’s also about sharing that music on other networks. So now I have all this great content, like the playlist Bruno Mars created, and I can repost that onto Twitter, on to Facebook. I believe that’s really great content that a lot of people will want to click on.

But I could already share songs and playlists on Twitter and Facebook from Spotify.

What we’re doing is removing friction. We’re making it a lot easier for people to do that. We’re making it a lot easier for people to find great content to share.

So if you make the product better it makes me more inclined to share really interesting stuff?

Yes. We’re creating a viral cycle, where new people are able to discover new content.

Since Spotify started it has been oriented around this idea of playlists, and sharing playlists. That made sense for some people, but not for a lot of other people, who were just trying to figure out how to listen to an album. Now you’re changing that — what took so long?

We look at what our users are doing. There were a lot of users who were perfectly happy with just playlists. What we realize now is that as we’re appealing to a much broader audience, we also have to support both. And we’ve been wrestling for quite a long time to figure out the balance, and we think we’ve finally done it.

Today was all about product stuff. No changes in the way the business operates, or the value proposition you’re offering. Will that change, and does it need to if you’re going to grow?

Would we ideally like a lower consumer price? Yeah. But at the same time, we’re doing really, really well as it is. And that’s reflected in our numbers.

Can you guys succeed as a business with the way your label deals are structured now? Pandora is struggling with the terms they have, and every other music service has failed to break through.

We’re incredibly happy with the structure and the terms that we have.

You don’t need the labels to change their rates for you to be profitable?

No, what we’re doing is we’re investing in growth. As I said earlier, we want to reach every single person on the face of this planet. And that means we’re going to forego profits, to keep investing in growing.

So if you stopped trying to grow now, you’d be profitable?

Yes.

A lot of today’s presentation seemed geared toward artists, some of whom have been vocal about the fact that they don’t think your model works for them. They think you guys make piles of money and they get pennies. How can you fix that?

By doing these kind of things. Telling the story, being honest about how much we’re paying back to rights holders.

But that’s part of the problem — you said you’ve paid $500 million back to rights holders, but most artists see very little of that. It goes to the labels.

I don’t know what kind of deals exist between the artists and the labels, and that’s a part of the controversy.

What is also fair to say is that Spotify is a young service. We’ve only been live in the U.S. for one year. And quite often it takes a year, or 18 months, for many artists to see their first checks from Spotify.

So there’s really this mismatch — people think, “there’s this big service out there called Spotify, and I haven’t gotten paid yet.” But the word is “yet” — not that they’re not going to get paid.

But some have gotten paid, and they’re complaining that the payout is tiny. And then they see that you’re worth $3 billion. Are you always going to have that kind of conflict?

I don’t think so. If we scaled up to a service the size of iTunes, the music industry would be two or three times the size it is today, in terms of revenue. We know that our fundamental model is sound. Now it’s just a perception problem. But more and more people are coming around.

In July, the company said it had 4 million paying subscribers and 15 million active users worldwide. That was up from 3 million paid subscribers last January and 1.5 million in the summer of 2011, right before the company arrived in the U.S.

Ek said 1 million of the company’s paid subscribers are now in the U.S. “We’ve been growing like crazy,” he deadpanned.

Spotify is likely to announce some new product stuff today as well — very likely along the lines of the stuff TechCrunch reported last month, though prior to the event, the Spotify staff was promising attendees that they were going to hear some truly significant news. So we’ll see.

Regardless, the numbers are a crucial marker for the company, which has made more headway than anyone else in the music subscription business, but which needs to get a whole lot further to justify its $3 billion valuation.

Founders Dave Duffield and Aneel Bhusri have been around long enough to know that this is simply a beginning, and they also know that as much as investors love subscription businesses, Wall Street has a fundamental misunderstanding of how to accurately value them.

In the last few years, a new business model has taken hold — it’s happening in music (Spotify), transportation (Zipcar), consumer goods (Shoedazzle), and, of course, in the software industry with the dominance of the cloud as the preferred model for consuming applications. But even while the Subscription Economy has taken hold across multiple, multi-billion dollar industries, investors, analysts and investor media continue to miss the fundamental differences between product and subscription companies that make their financial measurements just as different.

• Subscription businesses are about building and monetizing recurring customer relationships, not about building and shipping units for discrete one-time transactions.
• Subscription businesses are forward-looking, not backward-looking. The health of the business is in what it is likely to make this year, the next year and the next, not what it has shipped, earned and spent in the past period.
• Subscription companies operate on recurring revenue and recurring expenses and therefore care about recurring profit, not operating profit.

Just think about it. We all know that if Bob is willing to give you $100, while John is willing to give you $100 a year for the next eight years, John’s offer is much more valuable. In the same sense, subscription businesses should be a more attractive investment than traditional one-time sales models. With a subscription revenue model, each year you start off with a known revenue level, versus having to chase every dollar of revenue, each year, from ground zero. Whereas in the traditional model, you invest in R&D, cost of goods, and sales & marketing with the hope of generating future revenue, in the subscription model, revenue from customers you have already acquired can be used to fuel future growth.

Regardless, most investors and analysts still look at EPS and P/E ratios when evaluating subscription companies, even though they are essentially worthless metrics in the Subscription Economy. Take this commentary from Morningstar’s Rick Sumner around Workday’s IPO:

Workday is now among the most richly valued of recent cloud computing IPOs, with a valuation of 22 times trailing sales in the last twelve months. IT software company ServiceNow, which went public in June, was valued at roughly 14 times during the time of its IPO, while e-commerce platform provider Demandware was valued at 17 times. “Workday can grow when it’s smaller, but the question becomes when they get in excess of a billion in revenue, can they still bolt on this high growth rate to justify its valuation?”

I know what Dave and Aneel are in for. Take my experience at Salesforce.com — arguably the first company to popularize a publicly-traded subscription business. I started as employee No. 11, and was part of the executive team through the IPO in 2004 until I left to start Zuora in 2008. During that time, we spent a lot of time and energy educating Wall Street investors and analysts on the vast differences in SaaS company performance from a traditional software company. Many remained fixed on the P/E ratio, and could not fathom investing in a company trading — at that point — 200X future earnings. Inside Salesforce.com, we knew that operating profit was essentially meaningless to measuring our value. (Honestly, as an investor, I would ding a subscription business that brought operating profit to the bottom line, seeing it as a signal from the company that it is cutting Sales and Marketing spending because it can’t efficiently acquire new bookings.)

Fast forward eight years. SaaS as a category has overtaken traditional software because it is a fundamentally better business model for the customer and the vendor. Even Oracle and SAP are attempting to change their mix (spoiler alert: they will fail). Yet in eight years, Wall Street seems to have learned almost nothing. And with the Subscription Economy growing in communications, media, consumer services and more, you would expect that Wall Street analysts would finally have a better handle on the metrics that do matter.

For example, the most important financial statistic for valuing Salesforce.com is buried as a footnote on page 11 of its FY 2011 annual report — “Select off-balance sheet accounts” — $2.2 billion in unbilled deferred revenue. But that’s not a GAAP metric, so it’s not reported. You won’t see it on a balance sheet. You won’t read it in an earnings release. And you won’t hear a CFO talk about that on an earnings call.

Zuora often discusses the three metrics that matter when valuing any SaaS business. We believe that Annual Recurring Revenue (ARR) drives everything. A company’s Growth Efficiency Index (GEI – the sales and marketing expense needed to acquire new dollars of ARR), retention rate, and recurring profit margin (how much non-sales and marketing dollars are spent on servicing existing ARR) tell you far more than profits. But not a single one of these metrics is disclosed in GAAP financials. That’s a disservice to the companies, to analysts and to individual investors.

The other day, I saw that Salesforce.com’s P/E ratio had reached 666. Chat board posters were making half-joking calls for widespread selling with the sign of the beast at hand. But unless better metrics are made clear for investors, they may as well depend on the science of the Dark Ages for next quarter guidance. The Subscription Economy is here, and it is here to stay. It’s time that Wall Street finds a way to institute new measurements of subscription companies based on the financial statistics that actually reflect its health, value and future prospects.

Tien Tzuo is CEO of Zuora, a subscription-billing company based in Silicon Valley. Previously, he was the chief strategy officer and chief marketing officer at Salesforce.com.

Xbox Music will start rolling out tomorrow on the game console, replacing the Zune marketplace, and on Oct. 26 it will be baked into more devices as part of the Windows 8 launch.

Xbox Music will be familiar to consumers who use other streaming music services, like Spotify and Rdio. From the start, it will have access to more than 30 million songs globally and 18 million in the U.S. It’s launching in 15 countries.

A free ad-supported version will allow users to manage their entire music catalog from their PC and supplement it with an online catalog that is streamed over the Internet. Users will be able to skip from track to track, create playlists or listen to an album without restrictions (at least for the first six months). A premium version will cost $10 a month and will work across PCs, the game console and Windows 8 phones.

Both services will allow the user to purchase songs a la carte for about 99 cents each, or use the Smart DJ feature, which will let consumers discover new music based on their interests.

Xbox Music was first announced last June and, since then, a lot of the details have been spilled, but nonetheless, this represents an important launch for Microsoft. It is the first significant investment it has made in music since the launch of Zune five years ago, and this time it hopes it has come up with a winning formula, given the company’s intense interest in owning the home entertainment space. Digital music is something that Apple has so clearly dominated that others, like Amazon, can be fairly successful and still only make a small dent in its market share.

Next year, Microsoft will also launch apps for iOS and Android devices, which will require the premium version, but obviously will extend the potential consumer base beyond those who are only willing to own Windows devices.

In an interview, Scott Porter, Xbox Music’s principal program manager, said over time, “music became work, and we wanted to make it an enjoyable experience again.”

From a Windows 8 tablet, Porter showed me how you can easily play music after searching for an artist, or how you can create playlists without a lot of dragging and dropping. The free version, he estimated, would play advertisements every two to five hours, which is the standard created by other music servies. With the paid version, though, Porter said users will be able to stream or download songs, and back up their entire music collection to the cloud, which can then be accessed on the phone or other devices.

ShoeDazzle, the Los Angeles-based personalized style and retail service, is replacing its current CEO Bill Strauss with its founder Brian Lee.

In an interview, Lee said Strauss had “voluntarily resigned,” but did not give any further details of the departure.

Strauss joined ShoeDazzle last fall from a longtime stint running Provide Commerce, which has e-commerce sites such as ProFlowers and RedEnvelope.

“Bill has done some amazing things for the business,” said Lee, who has been serving as chairman of ShoeDazzle. “The company has so much potential and over the past year has grown tremendously.”

The start-up, which got its first burst of attention from its affiliation with famebot Kim Kardashian, recently announced that it would tweak its monthly subscription offering and it also added several new retail categories beyond shoes.

It has certainly gotten a lot of money to make it work, raising $60 million from a high-profile group of venture investors since it was founded in 2008, including from Polaris Venture Partners, Andreessen Horowitz and Lightspeed Venture Partners.

The reappointment means Lee will now have two CEO jobs — he has most recently been running The Honest Company, a monthly subscription service he co-founded with actress Jessica Alba and others that delivers bundles of eco-friendly diapers, wipes, skin care and home cleaning products.

Lee noted that Honest co-founder Sean Kane, who has been COO there, would be stepping up in helping run that start-up.

“These are two of the most exciting companies in L.A. and there are strong teams at both companies,” said Lee, who also co-founded LegalZoom.

To get an idea of the now multi-tasking entrepreneur, here’s Lee talking about Honest with Alba in a video interview I did earlier this year:

]]> http://allthingsd.com/20120924/exclusive-shoedazzle-replaces-ceo-with-founder-brian-lee/feed/ 0 http://allthingsd.com/20120909/yes-spotify-is-headed-to-the-web-no-spotify-isnt-cutting-its-prices/ http://allthingsd.com/20120909/yes-spotify-is-headed-to-the-web-no-spotify-isnt-cutting-its-prices/#comments Sun, 09 Sep 2012 19:00:23 +0000 Peter Kafka http://allthingsd.com/?p=248914 Waiting to use Spotify on the Web? Hang on a few weeks.

Waiting to pay $8 a month for Spotify’s premium service? Don’t hold your breath.

Yes, as TechCrunch reported yesterday, the streaming music company is getting ready to roll out a version of its service that will work on a Web browser, instead of requiring special software.

But it’s not, as TechCrunch suggested yesterday, preparing to cut the rate for its mobile, ad-free service by 20 percent.

The price cut would have been a biggish deal for Spotify, because it would have suggested that the company had concluded that its current model was broken. But it’s not happening now or anytime in the forseeable future, say people who understand Spotify’s thinking.

A couple things to bear in mind:

• Spotify, like its streaming service competitors, hands the music labels and copyright owners about $7 a month for each paid subscriber it signs up. Cutting its monthly fee from $10 a month to $8 would blow up its margins.
• Spotify is open to monkeying around with its pricing and lots of other features. For instance, it’s currently testing a version of the service that doesn’t require new users to sign up via Facebook. And in the long run, it would probably like to cut its prices if it could figure out how to make the economics work. But Spotify has already tested out a price cut, in Spain, and found it had little effect on take-up rates. So for now, if you want to hear Spotify without ads, or if you want to hear it on an iPhone or Android machine, it’s going to be $10.

As far as the browser goes: Some users should start seeing the option pop up in the next month or so. In practical terms, that means new and current users will find it easier to play songs immediately, because they won’t have to download or boot up secial software. That’s particularly useful when people encounter Spotify links via social media, or “play buttons” the company has been pushing out to Yahoo and many other sites.

But Spotify still expects most users to use its software most of the time, and will encourage new users to download the client.

The browser-based version will be missing some capabilites that Spotify thinks are crucial, like the ability to play cached music without an Internet connection, as well as the apps the company made a big fuss about last year.

The main idea here: Spotify has 15 million users, and 4 million of them are paying subscribers. It would like to increase both numbers, and thinks a Web-based version of the software will help do it.

But it’s also not counting on the browser to do a whole lot for them. Expect to see a big marketing push from the company — including evidence of the big Coke partnership it touted earlier this year — in the coming months.

]]> http://allthingsd.com/20120909/yes-spotify-is-headed-to-the-web-no-spotify-isnt-cutting-its-prices/feed/ 0 http://allthingsd.com/20120828/wittlebee-buys-up-clothing-maker-for-kids-apparel-club/ http://allthingsd.com/20120828/wittlebee-buys-up-clothing-maker-for-kids-apparel-club/#comments Tue, 28 Aug 2012 11:00:59 +0000 Tricia Duryee http://allthingsd.com/?p=245511 Culver City, Calif.-based Wittlebee, a service that sends members a box of kids’ clothing for $40 a month, has acquired Cottonseed Clothing Company. Terms of the deal were not disclosed, but going forward, the Chicago company’s apparel will be offered exclusively from Wittlebee. Wittlebee founder Sean Percival said the company was already manufacturing its own line of clothing, and that Cottonseed founder Erin Gutierrez will be able to “aid our operations as we ramp up our own private label offering.” Gutierrez remain involved as a consultant and advisor.

]]> http://allthingsd.com/20120828/wittlebee-buys-up-clothing-maker-for-kids-apparel-club/feed/ 0 http://allthingsd.com/20120827/ups-invests-in-same-day-delivery-service-shutl-ahead-of-u-s-launch/ http://allthingsd.com/20120827/ups-invests-in-same-day-delivery-service-shutl-ahead-of-u-s-launch/#comments Mon, 27 Aug 2012 16:29:57 +0000 Tricia Duryee http://allthingsd.com/?p=245280 London-based Shutl, which aims to build a fast delivery service, has received $2 million from one of the biggest logistics companies of them all: UPS.

UPS

Shutl says it plans to use the cash to expand its engineering team, sign up new retail partners and prepare to launch in the U.S. early next year. In addition to the UPS Strategic Enterprise Fund, investors in the round included Hummingbird Ventures and GeoPost.

The demand to get online purchases to a consumer’s door faster has been around for a long time.

Just today, Amazon announced that more items are shipped now using its Prime Two-Day Shipping service, which it launched in 2005, than with its Free Super Saver Offer. Amazon charges $79 a year for the Prime subscription service, which also includes free streaming videos and book rentals. It does not disclose how many of its customers are subscribers.

Through partnerships with retailers, Shutl will be offering 90-minute delivery windows, or the option of picking a one-hour window of your choice on the same day, or any day.

In August, eBay began testing a same-day delivery service, quietly sending out invitations to San Francisco residents. And other retailers are trying to solve the problem of getting packages to consumers more efficiently by building out a network of lockers. BufferBox is the most recent example, but there’s also ShopRunner, which combines two-day shipping with its own locker service. And in Europe, Kiala was recently snapped up by UPS.

Amazon is also building out a locker network, but it downplayed the idea of same-day shipping in July, when it said it had not found a way to do it economically.

“Since launching in 2010, we’ve focused on providing a service that blows away shoppers’ expectations,” said Tom Allason, Shutl’s founder and CEO, whom the Financial Times described as the quintessential start-up guy after seeing the 31-year-old college dropout recently wearing torn jeans and flip-flops.

“We’ve spent this last year taking Shutl national across the U.K.; now we are ready for the U.S., a market that we estimate will be worth around $26 billion by 2016,” Allason added. He is already claiming that the company’s revenue will reach the seven-digit mark this year.

Of course, delivery services have been well-tested and have failed — most notably, the dot-com bomb Kozmo.com, which promised free one-hour delivery. At least this time around, companies are charging for it.

]]> http://allthingsd.com/20120827/ups-invests-in-same-day-delivery-service-shutl-ahead-of-u-s-launch/feed/ 0 http://allthingsd.com/20120815/why-you-cant-watch-the-best-show-on-hbo-on-hbo-go/ http://allthingsd.com/20120815/why-you-cant-watch-the-best-show-on-hbo-on-hbo-go/#comments Wed, 15 Aug 2012 16:26:21 +0000 Peter Kafka http://allthingsd.com/?p=241642 “Hard Knocks” doesn’t have dwarves or dragons or naked (female) breasts. But it’s one of HBO’s best shows: If you love football, you know this already. If you don’t, you may be surprised to learn it’s a super-compelling, five-episode reality show that is also about the Miami Dolphins’ training camp.*

If that sales pitch convinces you, the HBO subscriber, to fire up HBO Go and check it out for yourself, then my apologies. You can’t see the show on HBO’s excellent digital service, because HBO doesn’t have the rights to show it there.

That’s because unlike nearly every original show HBO airs, “Hard Knocks” isn’t actually an HBO show.

It’s a co-production with NFL Films, and NFL Films owns the show’s digital rights, including mobile rights. And HBO Go, for the purposes of rights deals, is considered a mobile service.**

So that’s annoying. On the positive side, “Hard Knocks” appears to be the only glaring hole in the HBO Go lineup. So its absence makes you appreciate just how comprehensive the HBO digital catalog is. Digital media in general has been plagued by rights gaps, but they’re getting smaller all the time.

More good news: Even if you don’t pay for HBO, you can see the show’s first episode, online, for free. (But that’s a one-off sample, HBO confirms — you’ll need to subscribe and watch the show on a television set if you want to see the rest of the season.)

And if you’re willing to poke around YouTube, you can watch a good chunk of the series, too. Here’s the highlight of last night’s show — and perhaps the entire series: Former star receiver/current Twitter celebrity Chad Johnson getting cut, following his domestic battery arrest.

*Alternate description, via Bloomberg’s Keenan Mayo: “The best business show on TV.” I’m not sure about that. But it is pretty great.

** Calling HBO Go a mobile service makes sense, of course, because it works on iOS and Android devices. But it also works on any machine with a laptop, which points out, yet again, how the legal definition of “mobile” is becoming less and less useful.

]]> http://allthingsd.com/20120815/why-you-cant-watch-the-best-show-on-hbo-on-hbo-go/feed/ 0 http://allthingsd.com/20120809/the-spotify-effect-shows-up-streaming-music-boosts-warners-bottom-line/ http://allthingsd.com/20120809/the-spotify-effect-shows-up-streaming-music-boosts-warners-bottom-line/#comments Thu, 09 Aug 2012 13:59:40 +0000 Peter Kafka http://allthingsd.com/?p=239650 Streaming services like Spotify and Pandora have made a lot of noise. Now they’re actually generating money for the music labels, too.

Warner Music Group says streaming services contributed 25 percent of the digital revenue that its “recorded music” group saw last quarter. That works out to be about $54 million, or about 8 percent of Warner’s total revenue for the period.

What’s more encouraging for Warner — and, presumably, the rest of the big labels — is that streaming revenue is growing quickly, but doesn’t seem to be cutting into traditional digital sales from outlets like iTunes.*

Just as encouraging: Warner says that after you net out the effect of currency fluctuations, the increase in digital sales was bigger than the decrease in physical sales. That’s the goal the industry has been aiming for since the late 1990s.

*Warner defines “streaming” revenue as money it gets from subscription services like Spotify and Rhapsody, along with Web radio revenue from the likes of Pandora, Sirius and Clear Channel. It doesn’t include the new cloud/locker services from Apple and Amazon. [UPDATE: That number does include YouTube, though, which is a significant income source for some corners of the business.]

]]> http://allthingsd.com/20120809/the-spotify-effect-shows-up-streaming-music-boosts-warners-bottom-line/feed/ 0 http://allthingsd.com/20120806/the-new-york-times-reports-a-digital-success-story/ http://allthingsd.com/20120806/the-new-york-times-reports-a-digital-success-story/#comments Mon, 06 Aug 2012 12:40:38 +0000 Peter Kafka http://allthingsd.com/?p=238165 The New York Times’ pay wall, long debated in and outside of the company, now looks like a bona fide success.

The company has more than 530,000 paying subscribers for its digital editions, and it credits the plan with a consistent increase in circulation dollars. Which it needs, because its ad dollars continue to shrink.

Here’s another data point in favor of the plan: A report from Barclays analyst Kannan Venkateshwar, who estimates that the paper will have more digital subscribers than print subs within a couple of years.

The caveats: Even if Venkateshwar’s projections are right, the digital subscription story won’t solve all of the Times’ problems. For starters, each digital customer generates much less revenue than a print customer: The digital sub pays around $220 a year for the Times, versus approximately $730 for the paper-and-ink version.

And while the profits that each kind of sub generates for the paper should be roughly equal — because it’s a whole lot cheaper to produce and deliver a digital copy than a print one — that only holds true if the Times isn’t overly reliant on discounts to sell its digital subscriptions.

Still, Venkateshwar, who has been bullish on the Times for a while, argues that most of the digital subscribers to date seem to be new customers. So all of this is incremental revenue. That’s a best-case scenario for the paper.

 

]]> http://allthingsd.com/20120806/the-new-york-times-reports-a-digital-success-story/feed/ 0 http://allthingsd.com/20120803/cbs-loves-apple-tv-in-theory/ http://allthingsd.com/20120803/cbs-loves-apple-tv-in-theory/#comments Fri, 03 Aug 2012 14:56:01 +0000 Peter Kafka http://allthingsd.com/?p=237602 CBS boss Les Moonves gets asked a lot about his willingness to do business with Apple. And his answer is always the same: “Sure! As long as it’s on our terms.”

Yesterday’s earnings call was no exception. Here’s the full exchange between the CBS CEO and analyst Anthony DiClemente, via Seeking Alpha.

Anthony J. DiClemente — Barclays Capital, Research Division

Okay. And then one for Les. You — I’m sure — you may have seen that Apple TV added Hulu onto its platform this week. I’m just wondering, when you think about Apple, are you in any way philosophically opposed to offering CBS on the Apple TV platform? And I know I — just from prior experience, I’m sure your answer will have something to do with getting paid for your content. But more specifically, is there anything you need to see or specifically anything you need to get in order to be convinced that that’s a smart strategy for CBS?

Leslie Moonves

Look, Anthony, you’ve — we’ve had this discussion many times before. You’re right, it depends what the terms are, it depends what we get paid for. It depends on what effect Apple TV would have on either our advertising, our syndication or our retrans, which are our three main buckets of revenue for our content. So if it fits in well, like Netflix did and Amazon did, we’re happy to discuss it. If it doesn’t and we’re — they’re using our content to build a business, we’re not quite as favorable to that. So the devil is in the details. I know it sounds like a pat answer, but it’s really true.

Even in the transcript, it’s funny to watch Moonves and DiClemente go through the motions on this one. But I’m highlighting it here because it illustrates that digital video no longer seems like a conundrum to CBS and all the other big TV programmers. It seems pretty routine.

There are two main options:

Sell the old stuff: Once CBS and the other networks have aired their shows on their own networks, they’re generally happy to resell them, at nearly 100 percent profit. Recent programming goes to a la carte “electronic sell-through” stores, like iTunes; older stuff will show up on subscription services. For instance, now that CBS has stopped showing “CSI: Miami” after a 10-year run, that show is likely to end up on Netflix, Moonves said yesterday.

Sell the new stuff: If you want to run the current shows that CBS and others offer — the way the pay-TV providers do — then you have to act like a pay-TV provider, too. That means buying all of their program bundles, at market rates. Which is what Google is doing with its new Google Fiber TV service. And it’s the same proposition that Intel and other would-be “over the top” services are considering now.

It’s possible that Apple tries some brand-new option that the programmers haven’t seen before, like it did three years ago, when it was pitching a $30-a-month package for stuff that had just aired. And the new “channel-as-app” model that’s emerging on Apple’s devices and others offers some room for experimentation.

But the new semi-conventional wisdom — embraced by folks like Time Warner’s Jeff Bewkes — is that if Apple wants to get deeper into TV, it will work with the TV guys on the terms they already know.

]]> http://allthingsd.com/20120803/cbs-loves-apple-tv-in-theory/feed/ 0 http://allthingsd.com/20120802/aereo-celebrates-a-court-victory-with-clever-marketing-free-web-tv-for-an-hour-or-a-dollar-for-a-day/ http://allthingsd.com/20120802/aereo-celebrates-a-court-victory-with-clever-marketing-free-web-tv-for-an-hour-or-a-dollar-for-a-day/#comments Thu, 02 Aug 2012 14:02:54 +0000 Peter Kafka http://allthingsd.com/?p=237096 Fresh off the heels of a court victory, Barry Diller’s Aereo* is ramping up its marketing push with a clever new pricing scheme: The TV-on-the-Web service is rolling out new plans that will let users sample the service for free, buy it for a single day, or lock in for a year.

You can see the new grid at the bottom of the post. By far the most important things here are the free hour-a-day option, and the one-dollar, one-day pass. Both are obviously great ways to get consumers to sample the new service, and the free option doesn’t require a credit card account to sign up, which removes a big hurdle.

But the dollar option could also end up being the way that lots of people use the service, especially while its programming choices remain constrained to the broadcast TV channels. It may not be worth $8 or $12 a month to you to be able to watch CBS on your laptop or iPad. But there could be lots of one-off events that make it well worth a buck to get those channels on the go: Think Oscars, or election coverage, or football Sundays this fall.

The bigger picture is that Aereo has the ability to do any kind of pricing scheme it wants, because it’s not constrained by any licensing agreements, and doesn’t share any revenue with anyone. Spotify or Hulu or anyone else would love to do this kind of thing, but they can’t without arduous/impossible negotiations with copyright owners/investors.

At some point, some of that footloose feeling will go away — if Aereo builds out its bundle by adding, say, the likes of Netflix, it will have to figure out a different version of the pricing grid. But, for now, it’s a big advantage, as the company looks to expand outside of a few thousand early adopters in New York City.

[Click image to enlarge]

*To be clear: Diller doesn’t own Aereo; his IAC is an investor.

 

]]> http://allthingsd.com/20120802/aereo-celebrates-a-court-victory-with-clever-marketing-free-web-tv-for-an-hour-or-a-dollar-for-a-day/feed/ 0 http://allthingsd.com/20120613/apple-time-inc-solve-their-subscription-squabble/ http://allthingsd.com/20120613/apple-time-inc-solve-their-subscription-squabble/#comments Thu, 14 Jun 2012 04:23:07 +0000 Peter Kafka http://allthingsd.com/?p=220153 Apple and Time Inc. have settled their differences: The giant publisher is now selling subscriptions to its iPad magazines directly from the apps themselves.

If that seems like non-news, consider that it took the two companies two years to figure this out.

Up until now, Time Inc. has been the notable exception to Apple’s digital subscription plan, which lets publishers sell access to their digital titles from within its iTunes store, in exchange for certain concessions. For instance, the publishers don’t automatically get to see all of a subscriber’s personal information, and Apple collects a 30 percent fee for each subscription it sells at its store.

Again, unless you’re in publishing and/or paying attention to this stuff, you wouldn’t notice. But here’s what the subscription page at Sports Illustrated looked like on Wednesday — note that there’s no way to actually subscribe via the app:

And here’s what it looks like now:

What changed? It could be as simple as Time Inc. trying to boost sales, which haven’t been stellar recently — a slump at its People magazine title is particularly troublesome for the publisher. Or perhaps parent company Time Warner got some other concession from Apple for one of its other units, like HBO or Turner.

Worth noting: Earlier this week, Tim Cook announced a tie-up with Facebook, another company Apple has tussled with for the last couple years. One more of these peace-making deals and we can call it a trend.

]]> http://allthingsd.com/20120613/apple-time-inc-solve-their-subscription-squabble/feed/ 0